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Is the blockchain good for security?

Maria Korolov | April 4, 2016
The blockchain is now being hyped as the solution to all inefficient information processing systems

More Bitcoin, more problems

Peter Williams, chief edge officer at Deloitte's Centre for the Edge, calculates that each Bitcoin transaction costs roughly $6 in hardware and energy, and consensus approval of each transaction takes about 10 minutes.

That kind of performance doesn't necessarily compare well to competing technologies.

But some of this is due to the way that Bitcoin uses the blockchain.

"Bitcoin throughput is limited," said Mance Harmon, senior director of labs at Ping Identity. "To increase throughput means that you need a business relationship in place, and more trust between peers."

That is very much possible when a blockchain is used by, say, a limited group of business partners.

For example, banks would send money directly to one another instead of going through a centralized clearinghouse like SWIFT or ACH.

In February, 40 of the world's largest banks conducted a trial of five blockchain technologies, including Ethereum, a public block chain platform, as well as blockchains from Chain, Eris Industries, IBM, and Intel.

Ethereum claims to take only 17 seconds to process a transaction, while a San Francisco-based startup, Safe Cash, announced last month that it can process a transaction in under five seconds -- and can handle up to 25,000 transactions per second.

According to Autonomous Research, blockchain technology could save the financial system $16 billion by 2021, or one-third of annual clearing and settlement costs globally.

But getting to that point could be extremely difficult, said Larry Tabb, founder and CEO at Tabb Group, in a report released in February.

"Many massive and in some cases what seem to be insurmountable challenges need to be overcome," he said. "This will take not only years but hundreds of millions if not billions of investment dollars across banks, investors, custodians, and industry infrastructure."

Larger attack surface

As any company with a big database knows, hackers love going after sensitive information. If a blockchain is used to store confidential contract information or payment data, then replicating the file could potentially offer hackers more places to get their hands on it.

This isn't a problem for blockchain data that is meant to be visible to the public. But many investors, for example, would not like others to know that they are taking a position in a particular security, said Tabb.

If the information is meant to be visible, then having multiple copies means that the data is less likely to be lost, said Ping Identity's Harmon, since there are multiple copies of the records.

And if the blockchain contains encrypted information, then it doesn't much matter whether the peers access the data in a single location or in multiple locations, since the number of access points remains the same.

 

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